A number of states, California and Illinois for example, have recently experienced fiscal problems because tax revenue has not kept up with expenses. States and cities have defaulted on debt in the past. Give an argument for and against the idea of the federal government bailing out the cities and states.

Topic accounting

(If you dont know the answer please quit)

Question 1

a) Differentiate between the 'definition of assets' and the criteria for recognition of assets' provided in the conceptual framework.

b) If an asset is expensed in one financial year because future economic benefits were not deemed to be 'probable', can the same asset be reinstated in future periods if the benefits are subsequently assessed as probable? In this respect, does the ability to reinstate assets apply to all assets? Briefly explain.

c) AASB 101 stipulates a number of disclosures that many reporting entities are required to make. What specific disclosures are required by AASB 101 in relation to assets?

d) Is depreciation an allocation process or a valuation process? Provide reasons for your answer

e) In an article that appeared in The Australian Financial Review on 26 August 2011 ('Apple could easily flounder without its founder' by Mark Ritson), it was reported: The news that Steve Jobs has resigned from Apple and will be replaced as CEO by Tim Cook made global headlines yesterday What has followed since has been a frenzied discussion of what the loss of Jobs will mean for new product development timelines, share price issues and corporate culture. Apple's share price fell 5 per cent on the news of the resignation as questions were raised about Apple's prospects without its creative guru at the helm. But the real question for Apple as it enters its post-Jobs period is how well the brand will survive without the founder. Required The fact that the share prices fell following the departure of Steve Jobs is consistent with the view that Jobs was an 'asset' to the company. How do you think this 'asset' would have been disclosed in the financial statements of Apple?

f) What is a contingent asset? When should a contingent asset be disclosed within the notes to the financial statements? If something is initially disclosed as a contingent asset, when can it subsequently be recognised as an asset within the financial statements? Briefly explain.

Question 1 a) Differentiate between the 'definition of assets' and the criteria for recognition of assets' provided in the conceptual framework. b) If an asset is expensed in one financial year because future economic benefits were not deemed to be 'probable', can the same asset be reinstated in future periods if the benefits are subsequently assessed as probable? In this respect, does the ability to reinstate assets apply to all assets? Briefly explain. c) AASB 101 stipulates a number of disclosures that many reporting entities are required to make. What specific disclosures are required by AASB 101 in relation to assets? d) Is depreciation an allocation process or a valuation process? Provide reasons for your answer e) In an article that appeared in The Australian Financial Review on 26 August 2011 ('Apple could easily flounder without its founder' by Mark Ritson), it was reported: The news that Steve Jobs has resigned from Apple and will be replaced as CEO by Tim Cook made global headlines yesterday What has followed since has been a frenzied discussion of what the loss of Jobs will mean for new product development timelines, share price issues and corporate culture. Apple's share price fell 5 percent on the news of the resignation as questions were raised about Apple's prospects without its creative guru at the helm. But the real question for Apple as it enters its post-Jobs period is how well the brand will survive without the founder. Required The fact that the share prices fell following the departure of Steve Jobs is consistent with the view that Jobs was an 'asset' to the company. How do you think this 'asset' would have been disclosed in the financial statements of Apple? f) What is a contingent asset? When should a contingent asset be disclosed within the notes to the financial statements? If something is initially disclosed as a contingent asset, when can it subsequently be recognized as an asset within the financial statements? Briefly explain.

On May 1, 2020, Johnson Corporation issued $300,000, ten-year, 12% bonds which were priced to yield 14%. The bonds were dated March 1, 2020, and pay interest semiannually on March 1 and September 1. Johnson is a calendar year corporation. Determine the issue price of the bonds and prepare the September 1, 2020 journal entry for Johnson Corporation.

During 2020, Harris Inc. reported revenues of $237,000 and expenses of $130,000, and declared cash dividends of $65,000. Retained Earnings on December 31, 2019 was $165,000. Required: Prepare closing journal entries as at December 31, 2020; show your journal entries. Calculate the balance in Retained Earnings on December 31, 2020. Please show your work.

(use appendix to solve)

On 1 July 2020, Brooklyn Ltd (lessor) leased Equipment to New Ltd (lessee).

The lease agreement contained the following:

What would be the journal entries on 1 July 2020 for the lessor (Brooklyn Ltd)?

X Company estimates the following for its only two products for 2020 - X and Y:

Total fixed costs in 2020 are expected to be $17,400. What is the expected weighted average contribution margin per unit in 2020 (rounded to two decimal places)?

Tia is married and is employed by Carrera Auto Parts. In 2019, established high-deductible health insurance for all its employees. The plan has a $2,700 deductible for married taxpayers. Carrera also contributes 5% of each employee’s salary to a Health Savings Account. Tia’s salary is $43,000 in 2019 and $45,000 in 2020. Tia makes the maximum allowable contribution to her HSA in 2019 and 2020. She received $600 from the HSA for her 2019 medical expenses. In 2020, she spends $2,000 on medical expenses from her HSA. The MSA earns $30 in 2019 and $48 in 2020.

Round intermediate computations and final tax liability to the nearest dollar.

a. What is the effect of the HSA transactions on Tia's adjusted gross income?

The maximum aggregate contribution to an HSA for a family in 2019 is $______. The earnings of an HSA, as well as medical reimbursements, are (excludable/included). Based on Carrera's contribution, in 2019, Tia (can/cannot deduct) for AGI $_______

b. What is the balance in Tia's HSA account at the end of 2020?

Tia has $_________ in her HSA account at the end of 2020.

Questions #2 Basic and diluted earnings per share

The following data are presented by Quentin Corp. for calendar 2020

Net income                                                                                                                                                                               $ 4,500,000

Common shares outstanding, 1,000,000 shares

10%, cumulative preferred shares, convertible into 120,000 common shares                             $ 1,600,000

8% convertible bonds; convertible into 105,000 common shares                                                        $ 7,500,000

360,000 call options exercisable at $ 25 per share

Additional information

1.       The common and preferred shares and the convertible bonds were outstanding from the beginning of the year.

2.       In 2020, a $ 500,000 dividend was declared and distributed; however, no dividends were declared in 2019.

3.       The average market price of the common shares in 2020 was $ 30. The stock price was $ 27 on January 1, 2020, and $ 35 on December 31, 2020.

4.       The convertible bonds were sold at par.

5.       The income tax rate for 2020 is 30%.

Instructions

a)      Calculate basic EPS.

b)      Calculate diluted EPS.

c)      Briefly discuss the usefulness of the EPS measure in general. What is the additional importance of reporting diluted EPS?